Madagascar faces significant economic challenges, with sluggish growth, persistent poverty, and limited structural transformation. Weak governance, inadequate human and physical capital development, and slow structural transformation have contributed to the country’s economic struggles. More than 90% of the working-age population remains engaged in subsistence agriculture and informal jobs, hindering job creation, economic growth, and poverty reduction. The country’s investment average of 19.4% of GDP during 2013 to 2019 is much lower than that of its peer countries, leading to insufficient growth and perpetuating poverty. However, Madagascar also possesses vast potential for growth, with a young population, unique biodiversity, dense forests, fertile agricultural land, and a lengthy coastline. Recent bold reforms in mining, telecom, and energy aim to foster the growth needed to break the cycle of poverty, create jobs, and stimulate the private sector. These reforms, which promote market competition and transparency, are crucial for addressing elite capture and unlocking opportunities for economic advancement.
Despite the economic challenges, Madagascar presents opportunities for private sector investment. The country boasts rich natural capital, including dense forests, a lengthy coastline, substantial mining potential, abundant water resources, and diverse biodiversity. However, mobilizing private climate finance will require fiscal incentives, financing models, and technical and financial support for businesses involved in developing natural capital. The current account deficit widened to 5.7% of GDP in 2022, and poverty remains high, with an estimated 81% of the population living in poverty. The unemployment rate in Madagascar is 2.6%, with 70% of the unemployed being young people aged 15–30.
Real GDP grew 4.2% in 2022, down from 5.7% in 2021, due to the effects of tropical storms, the COVID-19 pandemic, and other factors. However, the country is projected to experience real GDP growth of 4.2% in 2023 and 5.0% in 2024, driven by a rebound in mining and quarrying and continued recovery in other sectors. Madagascar’s economic challenges are further compounded by a mostly unregulated economy, weak judicial system, poorly enforced contracts, and rampant government corruption. Agriculture, including fishing and forestry, accounts for more than one-fourth of the country’s GDP and employs roughly 80% of the population. The country faces significant obstacles in improving education, healthcare, and the environment to boost long-term economic growth. Addressing these challenges and leveraging the country’s natural resources and potential for growth will be crucial in overcoming the economic hurdles and creating opportunities for sustainable development.
